How an export champion maintains its innovation edge

screen-shot-2017-02-17-at-12-08-54-pm

A frequently-used case study on what Australian advanced manufacturing encompasses –
including a global mindset, high-value products and sophisticated technology – ANCA is a
local manufacturers’ manufacturer. Co-founder Pat Boland told Brent Balinski
a few things about what guides the company’s approach to innovation.

WHEN we spoke to ANCA co-founder Pat Boland, shortly after the company won one of its many export awards, the conversation began and ended on the same subject. Specifically: the needs of its customers and how these drive innovation.

Concepts like “listening to the customer” and “understanding their problems” is a staple requirement when it comes to service rendered and should always be a top priority.

Responding to customer problems has been the primary method of innovating for ANCA during its four decades-plus history. Customers are highly varied – including in electronics, medical and aerospace industries – and located all over the world.

It can be a “sort of failure” that drives a project – where something doesn’t work exactly as it could – or other identified demand for better performance. Boland mentions on-machine measurement of a tool, achieved by a probe inside a unit, as an example.

“That was basically because the approach that we and other people were using did not work when it came to cutting and grinding tools,” he told Manufacturers’ Monthly.

“The geometry of cutting tools is too complex… And that really came out of sitting down and saying ‘how are we going to get this to actually work?’”

Other improvements come out of the periphery of problem-solving, which is underpinned by a sophisticated understanding of users’ issues.

“Sometimes we’re trying to solve one problem and have an engineer say ‘well look, in searching this, I’ve found this paper and I suggest we confront this much bigger problem, by taking this approach,’” explained Boland.

“And that’s really how the development of our 3D simulation software [CIMulator 3D, an industry first] came about.”Bayswater North-based ANCA exports 99 per cent of its cutter and grinder tool machines, and counts companies including Boeing, Rolls Royce and various Apple suppliers among customers.

The company was established by Boland and Pat McCluskey, who worked together at a government munitions factory, in 1974 .Boland describes the company’s approach as combining academic/engineering sophistication and “practical trade skills”, with the machines needing to be robust and simple to use.

Following a recession in the early 1980s, the two Pats – who initially made just CNC control systems – decided to chase an export market for machine tools.

New technology for new materials

Demand for these systems has grown sharply since, with the company
successfully innovating around changing needs of their customers, which make the tools that make products that we use every day.

In recent years, this has included .responding to increased use of carbon fibre-reinforced plastics, particularly in aerospace and automotive. These can be tough on tools, which might have to – in an aerospace example – go through multiple layers of different material.
Demand for CFRP has increased the use of polycrystalline diamond tooling, for which ANCA has engineered solutions such as its EDGe units, which can grind both
PCD and carbide.

The pipeline of projects for the company is always much bigger than can be completed, said Boland. The company has developed formalised priority settings to try and deploy R&D where it is most meaningful. It is currently working to formalise its development programs, including collecting customer feedback and writing innovation programs into engineers’ objectives. (Of 400 staff at Bayswater, about a quarter are engineers.)

An important area is striking the right balance between customers’ general requests and working on what can be applied generally. A lot of work is “sort of on the edge of
innovation,” Boland said.

“It’s that fine line between contract engineering and innovation… It’s what we look for when we’re doing work in relation to a customer. We’re always trying to generalise it so it can be applied across a wider range of customers.”

It can be a tricky to maximise the value created from an R&D budget (at ANCA this can be as high as nine per cent of revenue) he added.

“Some minor projects end up being very, very successful and some big projects end up not so successful,” he said.

International orientation

ANCA manufactures in Thailand, Germany, US, the UK and Taiwan, and has about 900 employees worldwide. It credits its highly global focus as helping it remain competitive, and has said that competing locally and on cost is a losing strategy for Australian manufacturers. This is a view shared by many in the advanced manufacturing community.

Its approach has seen it widely celebrated as an example of what Australian manufacturers have to do to succeed – to focus on high-value, high-technology products, serving the value chains of multinationals.

Its numerous awards include Manufacturer of the Year at the Manufacturers’ Monthly Endeavour Awards (most recently in 2015) and Australian Exporter of the Year in 1995 and 2015. Last month it entered the Australian Export Awards Hall of Fame (one of only 11 companies to have done so.)

For 2015, the company achieved records for sales and production. In 2014 – 15, revenues were nearly $200 million. Boland describes this as “the crest of a wave” due to the IT industry in Asia tooling up for new products such as smartphones and tablets.

The co-founder described 2016 as “very solid” but a “return to normality”. The US – where ANCA is currently expanding its showroom – has been a standout. While manufacturing isn’t in boom times there, many manufacturers are trading in old equipment for new, seeking productivity improvements.

The United States is sometimes cited as a country with approaches to innovation worth learning from.
Boland believes their approach to taxation for business investment is a good one.

“I think that there’s room for more targeted tax rates, things like accelerated depreciation, investment allowances, which actually – rather than spread the tax cuts through the whole economy – have some focus on where it is the companies which are investing can operate in a lower-tax environment,” Boland said.

“I think a lot of the objections on it all going off to fund the banks and whatever would evaporate if the same level of tax cuts was pushed into something like an investment allowance. We see in the US where for various projects there’s always a spike in investment, where customers are trying to spend money to take advantage of that tax.

“I think for manufacturing in Australia, one thing we need is more investment in capital.”
To continue with the US, ANCA recently made a trip to Chicago’s International Manufacturing Technology Show. Boland said there and elsewhere, the focus on the Internet of Things (sometimes used synonymously with Industry 4.0) was obvious.

“Everywhere it was taking information from the shop floor and collating it and interfacing into ERP systems where you would have a real-time connection from what’s happening on the shop floor to management software through to just machine monitoring,” he said.

Sometimes dismissed as a fad, linking the virtual to physical world – with the intelligent use of data from machines – is something ANCA’s customers are very much interested in.

One recent Swiss visitor to Bayswater told their host that all capital purchases were made according to a 40/140 rule. No machine tool would be bought that didn’t give 140 hours of output from 40 hours of manned operation.

“To achieve that, that really implies that Internet of Things, because obviously there’s a lot of monitoring that’s got to take place if you’re going to achieve that sort of outcome,” Boland said.
And as with elsewhere, spurred by a major customer problem, this is where ANCA will be innovating now and into the future.

“That is a distinct call from our customers – for increased unmanned operation,” Boland said.